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331. Memorandum From the President’s Assistant for National Security Affairs (Kissinger) to President Nixon 1

SUBJECT

  • State Memorandum on Heath’s New Reform Programs

Acting Secretary Irwin has sent you a memorandum (Tab A)2 on “Heath’s Quiet Revolution for Britain.” It points out that with his proposal to get some control over the unions through a variant of our Taft-Hartley approach3 and the new Tory budget—featuring cuts in taxes, government expenditures, industrial and social welfare subsidies—Heath’s domestic program is now taking shape.4

Although not likely to have much immediate impact on the British economy, the new actions are first steps in a direction that could produce benefits over the next several years. They represent reversals of a 20 year trend and an important shift toward lessening the role of government in the U.K., and giving greater scope to private enterprise. The immediate effect of the new proposals will come less from their economic potency than from their psychological signaling. Much stronger measures will be required to pull Britain out of her economic difficulties.

Heath has taken a political gamble, however, that the gains of his program in terms of long-run economic growth will offset the political risks of reductions in social welfare expenditures and in putting some checks on the unions. A bitter political battle is already developing with Labor opposition leaders and the trade unions, who may exert new pressures for wage increases and thus hinder Heath’s campaign against inflation. Fortunately, Heath currently enjoys a strong political position with a working majority and no elections needed before 1975. However, his new economic actions (especially on social welfare) may erode his popular support.

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Internationally, as Secretary Irwin’s memorandum states, Heath has put in a bid to preserve Britain’s place in world affairs. The new Defense White Paper,5 also recently announced, affirms British intentions to maintain some forces East of Suez (which we have encouraged), while at the same time stepping up in modest fashion the U.K. military contribution to NATO and halting the decline in the defense budget.

The current British negotiations with the European Community are crucial, as Heath knows, for Britain’s long run economic health and international role. His new fiscal measures at home should help him put his house in order and improve his image in Europe. But there remain serious doubts over the U.K.’s ability to stand the additional strain on its balance of payments of the terms of entry which the Six will undoubtedly require.

Your forthcoming talks with Heath will provide an opportunity to review the major issues he faces—especially the status of the EEC accession negotiations and their political as well as potential military implications. (The British may show renewed interest in military cooperation with France).6

  1. Source: National Archives, Nixon Presidential Materials, NSC Files, Box 727, Country Files—Europe, United Kingdom, Vol. IV. Confidential. Sent for information.
  2. Not printed.
  3. Reference to the Labor Management Relations (Taft-Harley) Act of 1947, Public Law 101, June 23, 1947. For text, see 61 Stat. 136.
  4. The President wrote the following note at the top of the page: “A very courageous program—a political risk—but Britain’s only chance to survive depends on his success.” The Heath government’s economic policy was introduced on October 27 with the release of two White Papers, New Policies for Public Spending (Cmnd. 4515) and Investment Incentives (Cmnd. 4516).
  5. The Conservative government’s defense policy was set out in a Supplementary Statement (Cmnd. 4521), October 28, 1970. It modified Statement on Defense Expenses (Cmnd. 4290) issued by the Labour Party government in February 1970.
  6. The President wrote on the memorandum: “H[aldeman]—a letter to Heath marked personal. Dear Mr. Prime Minister, Since returning from Paris I have had an opportunity to study your October 26 statement. As a not too impartial observer I would call your proposals bold, gutsy and right. There is of course a political risk to taking such controversial steps. But the alternative would have been to let Britain continue to slide into second place position as an economic & political power. I wish you every success and shall look forward to our meeting in December. (bring to RN for signature)”. The President visited France November 10–12 for the funeral of General de Gaulle. The President’s message was sent on November 18. Heath’s November 23 reply is in the National Archives, Nixon Presidential Materials, NSC Files, Box 727, Country Files—Europe, United Kingdom, Vol. IV. Kissinger’s note on the first page, which reads: “I think he has already written this letter,” was apparently made after Nixon’s letter was sent.